2009 Starts With A New Record......Largest & Fasted LBO Bankruptcy Filing......

At least to my knowledge.....Barely one year after buying the US chemical company Lyondell for $ 19 billion the 3rd. largest chemical company is filing for bankruptcy for 79 of its global affiliates Details via FT Alphaville. According to Breaking News ( no link ) the deal was financed with $ 13 billion of new debt. The major piece was a $ 8 billion bridge loan with a coupon of 9,5 percent...... After the refinancing collapsed ( what a surprise ) the rate jumped to 12 percent..... And some still think the prices for the leveraged loan market are not reflecting the real market prices ( have heard many conference calls from banks that still refuse to mark to market their leveraged loan book "our loan is different...")...... This is indeed a perfet example of how much excess has fueled that LBO & Private Equity markets until 2007..... Maybe the CEO from Dow Chemical should read the bankruptcy filing very closely...... The following chart is a good guide that more Chapter 11 filings are on the way and this record won´t last for long............

Zumindest meinem Kenntnisstand nach......Knapp ein Jahr nach der Übernahme des US Chemieunternehmens Lyondell für satte 19 Mrd $ hat das in Rekordzeit zum drittgrößte "hochgezüchtete" Chemieunternehmen LyondellBasell für 79 Tochterunternehmen ( siehe Details via FT Alphaville ) Insolvenz angemelden müssen. Nach Angaben von Breaking News (kein Link) ist die Übernahme seinerzeit mit 13 Mrd $ an neuen Verbindlichkeiten gestemmt worden. Davon satte 8 Mrd $ mittels einer Brückenfinanzierung die zügig refinanziert werden sollte. Wie wir alle wissen ist den Kreditmärkten nach jahrelangem Tiefschlaf ein Licht aufgegangen und die Banken blieben auf Ihren Krediten sitzen. Der Zinssatz dieser Finanzierung ist von seinerzeit 8% auf nun 12% gestiegen. Schon lustig wenn immer noch einige denken das die gehandelten Preise für diese Leverage Loans als übertrieben niedrig betrachtet werden und die Weigerung nach "Mark-to-Markt" zu bilanzieren ständig erneuert werden . Bin mal gespannt ob Ackermann & Co ( "Unsere Leveraged Loans sind anders"....sprich besser als der breite Index ) bei der nächsten Präsentation der Abschreibungsrunde in Ihren Kommentaren etwas demütiger werden...... Dieses Beispiel zeigt mehr als eindrucksvoll wie vollkommen irre die Exzesse bis zum Jahr 2007 im Bereich LBO und Private Equity gewesen sind...... Ich hoffe der CEO von Dow Chemical der ja momentan drauf und dran ist einen vergelichbaren Fehler zu wiederholen liest sich das Filing ganz genau durch. Hätte Familie Schaeffer beim Contideal auch gut zu Gesicht gestanden..... Der nachfolgende Chart dürfte einen Vorgeschmack darauf geben was uns an Problemfällen nich erwartet...... Tippe mal das dieser Rekord von LyondellBasell noch in diesem Jahr gebrochen wird..... FAZ Auf die Gläubiger kommen hohe Verluste zu & FT Deutschland Großaktionär flüchtet aus Air Berlin Da benötigt aber einer dringend Kohle um bei Lyondell zu "verbilligen".......

This chart illustrates further that Private Equity wasn´t the only one that fell in love with debt.... Several listed and former sound companies will pay a very high price for their way to often megalomaniac takeovers and mergers. Just ask Rio Tinto.... They bought Alcan with close to $ 40 billion of new debt just to fend off the BHP Billiton approach ( see Debt Details via FT Alphaville ) A poison pill indeed....... :-)

Diese Übersicht belegt eindeutig das nicht alleine Private Equity dem Wahn des billigen Geldes und unsolider Übernahmen erlegen ist..... Unglücklicherweise wird es auch viele ehemals solide Unternehmen erwischen die Ihre oft wahnwitzigen Megadeals in Cash also neuen Krediten finanziert haben. Fragt mal bei Rio Tinto nach...... Die haben einzig und alleine um die Übernahme durch BHP Billion zu verhindern mal eben für knapp 40 Mrd $ Alcan erworben..... Selbstredend fast ausschließlich durch die Aufnahme neuer Schulden ( Deteils der Verschuldung ...... Das nenne ich mal ne echte Giftpille.......

Jan. 7 (Bloomberg) -- LyondellBasell Industries AF SCA’s Lyondell Chemical unit and some other U.S. affiliates, citing waning demand for their products, filed for bankruptcy in New York.

Lyondell Chemical, based in Houston, has assets of $27.1 billion, debt of more than $19.4 billion and more than 25,000 creditors, according to a petition filed yesterday in U.S. Bankruptcy Court in Manhattan. Seventy-nine of the company’s affiliates also will file for court protection, including Basell Finance USA Inc., according to the filing. ( see Text via FT Alphaville )

LyondellBasell, one of the world’s largest closely held chemical producers, said it sought protection for its U.S. business because of a “dramatic softening in demand” during the past six months as well as “unprecedented volatility in raw materials costs.” The company said in a statement that it expects a recovery during 2009.

> No word about the massive leverage....... If their recovery plan is based on the assumption that there will be a rebound in 2009 that will last i think it is a safe bet that they are still smoking some of the funny stuff.....

> Schon peinlich wie der Hautgrund, die extrem hohe Verschuldung, nicht erwähnt wird...... Fast genauso peinlich ist die Annahme das sich bereits im Jahr 2009 alles wieder nachhaltig zum besseren wenden wird......

Biggest Creditor
Lyondell’s largest unsecured creditor is the Bank of New York Mellon Corp., as trustee for $615 million in unsecured notes, as well as $241.4 million in unsecured notes in affiliate Millennium America Inc., according to the court filing. LyondellBasell is saddled with $26 billion in debt. Its largest lenders include Merrill Lynch & Co., Goldman Sachs Group Inc. and Citigroup Inc.

Standard & Poor’s predicted “substantial principal losses for some creditors” of LyondellBasell, analysts led by Frankfurt-based Tobias Mock wrote in a Dec. 30 report.

Petroleos De Venezuela, the Venezuelan state-owned oil company was listed as a third-largest unsecured creditor, with $233.6 million in trade debt.

Lyondell’s Houston Refining unit imported an average of 198,000 barrels a day of crude oil from Venezuela in the first nine months of last year, according to U.S. Energy Department data. The refinery has a contract to buy 230,000 barrels a day of oil from Petroleos de Venezuela, according to a Nov. 13 securities filing. PDVSA, as the company is known, didn’t return a call seeking comment yesterday.

BASF Claim
BASF Corp., based in Florham Park, New Jersey, may have a claim worth $206.4 million under a judgment against the company which is “contingent and disputed,” according to court documents. The company is a unit of BASF SE, the world’s largest chemical producer, based in Ludwigshafen, Germany.

Apollo Management LP, the private-equity firm led by Leon Black, is among Lyondell Chemical’s largest creditors, according to a person with direct knowledge of the matter.

Apollo, based in New York, is a member of a lending group providing so-called debtor-in-possession financing to fund Lyondell’s operations, according to the person, who asked not to be identified because Apollo’s stake hasn’t been disclosed. Steven Anreder, a spokesman for Apollo, declined to comment. Lyondell spokeswoman Susan Moore didn’t return phone calls seeking comment.

Access Industries ( which owns LyondellBasell ) agreed to provide $750 million of the $3.25 billion in loans to fund Lyondell Chemical’s operations during bankruptcy, Access said in a statement distributed by PR Newswire.

Goldman Sachs, Merrill, Citigroup and other banks arranged the financing, which includes $12.5 billion of first-lien bank loans, $5.5 billion of second-lien notes and loans and $2.5 billion of third-lien notes and loans, according to S&P.

> This "so-called debtor-in-possession financing" from Apollo & Co is more like a doubling down......

> Dieses sogenannte "debtor-in-possession financing" von Apollo & Co. ist in Wirklichkeit ein verzweifelter Versuch vom vorherigen Investment überhaupt noch was zu retten......

Bloomberg

Apollo, TPG Inc. and Blackstone Group LP’s GSO Capital Partners were among buyout firms that bought high-yield, high- risk debt last year at discounted prices. The average high-yield loan price fell 28 cents on the dollar last year to 66.6 cents, according to Standard & Poor’s LCD, as Wall Street firms whittled down $230 billion of loans they’d promised to private-equity firms to fund takeovers before credit markets seized up.

“Apollo may be trying to protect an earlier error in judgment with Lyondell,” said Jonathan Macey, a law professor at Yale University. He said Apollo may be trying to avoid deeper losses by providing bankruptcy financing.

Apollo bought Lyondell bank loans from Citigroup in April, bankers familiar with the sale said at the time. Citigroup sold about $1.9 billion of the debt, about a fifth of a $9.45 billion term loan, according to a CreditSights Inc. report on April 29. Goldman Sachs Group Inc., Merrill Lynch & Co. and the other banks that held the loans offered to sell the debt above 90 cents on the dollar in May, according to a Standard & Poor’s LCD report that month.

> On top of this it wouldn´t surprise me if any of the loans Citi managed to unload are heavily financed through Citi aka the taxpayer..... Wouldn´t be the first time.... ( see UFOs (or Unidentified Financing Objects) & No Kidding.... More Off Balance Sheet Vehicles For Citigroup , & Banks use discounts to tempt ‘vulture funds’ )...... I think this quote “Most of the leverage being provided by banks is only being provided if you buy their loans” sums it up......

> Darüberhinaus würde es mich nicht wundern wenn von den Krediten die losgeschlagen werden konnten die Finanzierung vom selben Haus ( also in diesem Fall Citi oder besser dem US Steuerzahler) bereitgestellt worden ist..... Wäre ja nichts neues.... ( siehe UFOs (or Unidentified Financing Objects) & No Kidding.... More Off Balance Sheet Vehicles For Citigroup & Banks use discounts to tempt ‘vulture funds’ ) ....... Ich denke dieses Zitat “Most of the leverage being provided by banks is only being provided if you buy their loans” spricht Bände.....

$12.7 Billion Merger
LyondellBasell said Dec. 31 that it was considering alternatives, including a Chapter 11 filing, to restructure debt that financed its $12.7 billion merger a year ago.

Lyondell Chemical Worldwide’s 10.25 percent notes due 2010 most recently traded at 16 cents on the dollar yesterday, according to Trace. The Lyondell Chemical unit’s 9.8 percent notes due 2020 traded at 22 cents on the dollar. No quote was available for the 8.375 percent notes due 2015.

Blavatnik’s Stake
Lyondell Chemical is partly owned by Access Industries Holdings LLC in New York, founded by billionaire Len Blavatnik.

LyondellBasell was created in December 2007 by the $12.7 billion acquisition of Lyondell Chemical and affiliate Equistar Chemicals LP by Dutch chemicals company Basell AF SCA. The combination created one of the world’s largest independent chemical producers with 16,000 employees and pro-forma sales of $54.6 billion in the year through September, according to its Web site.

Merry Christmas / Frohe Weihnachten

I´ll be taking a few days off over the holidays & the new year and wish every reader & their families a merry christmas and a healthy new year.

Ich werde mir über die Feiertage mal eine Auszeit gönnen und wünsche allen Lesern & deren Familien ein besinnliches Weihnachtsfest und ein gesundes neues Jahr.

I guess "Bad Santa" has to work overtime this year........

Tippe mal das "Bad Santa"dieses Jahr ein paar mal mehr ausrücken muß........

Number Of The Day "Japan´s Export Plunge Record 27 Percent"

WOW! The strong Yen didn´t help......... I expect that the entire currency complex has the potential to become the next "battleground" ( hopefully not combined with "trade wars" see Has Beggar Thy Neighbor Started? via Naked Capitalism & The Major Risks for 2009: Tariffs, Wars, Currency, etc. from Merrill Lynch's David Rosenberg via Infectious Greed)........ The race to the bottom is already underway..... Let´s hope that we won´t see a crash of a major currency ( british Pound )...... At least there will be always a bull market ( one weak vs another less weak currency)..... Got Gold......?

Donnerwetter! Bleibt zu hoffen das wir als vergleichbare Exportnation etwas besser abschneiden...... Denke den Japanern wird gerade jetzt der erstarkte Yen nicht sonderlich gefallen..... Ich befürchte das uns das Thema Wechselkurse in den kommenden Jahren desöfteren heimsuchen wird ( hoffnetlich nicht auch in Form von "Handelskriegen" siehe auch Has Beggar Thy Neighbor Started? via Naked Capitalism & The Major Risks for 2009: Tariffs, Wars, Currency, etc. von Merrill Lynch's David Rosenberg via Infectious Greed)...... Der Versuch die Währung möglichst schwach zu halten ist weltweit bereits im vollen Gange. Ich würde mir nur wünschen das wir das ohne Kollaps eine der größeren Währungen überstehen. Denke da besonders an das britische Pfund...... Immerhin ermöglichen diese Märkte immer einen garantierten Bullenmarkt ( schwache vs einer wenigen schwachen Währung ) ...... Got GOLD?

Thanks to Bespoke

Japan Exports Plunge Record 27% as Recession Deepens Dec. 22 (Bloomberg) -- Japan’s exports plunged the most on record in November as global demand for cars and electronics collapsed, signaling more factory shutdowns and job cuts are likely as the recession deepens.

Exports fell 26.7 percent from a year earlier, the Finance Ministry said today in Tokyo. That was more than the 22.3 percent decline estimated by economists and the sharpest since comparable data were made available in 1980.

Shipments to the U.S. slid an unprecedented 34 percent and sales to China slumped the most in 13 years

The government today lowered its assessment of the world’s second-largest economy, saying it’s “worsening” for the first time since 2002. Gross domestic product shrank in the past two quarters, sending Japan into its first recession since 2001.

Toyota, Honda Motor Co. and Sony Corp. are among the companies that are shedding thousands of workers and closing production lines as profits dwindle. Car exports slid 32 percent last month, the most ever, and semiconductors slumped 29 percent, the ministry said.

UPDATE : Toyota Forecasts First Operating Loss in 71 Years on Yen, Sales

Compounding the drop in demand is the stronger yen, which erodes overseas profits. Every 1 yen gain against the dollar and euro trims Toyota’s annual operating profit by 40 billion yen and 6 billion yen, according to the company. The carmaker in November based its second-half earnings outlook on 100 yen to the dollar and 130 yen to the euro.

Today’s report showed the global recession is spreading to the emerging markets that propped up exports as demand from the U.S. and Europe evaporated. Exports to Asia fell 27 percent, the most in 22 years. Shipments to China, Japan’s largest trading partner, tumbled 25 percent, the steepest decline since 1995.

Exports to Europe slid 31 percent, the second-most ever.

Banana Republik Watch "Korea Edition"

Oh boy....... At least they have still a few people left in Korea paying attention to analysts at all....... Sooner or later they will realize that they very often provide the best value as an contrary indicator ( see Wall Street Finest ) .......

Leider kein Witz...... Immerhin gibt in Korea anscheinend noch einige die überhaupt einen Pfifferling auf das Urteil von sogenannten Analysten setzen....... Ich nutze Sie seit Jahren nur noch als Kontraindikator bzw. zur wenn ich mal wieder was aus den Rubriken Satire & Science Fiction lesen möchte....... Spare mir so das Abo der "Titanic"...... :-).... Hier ein paar Beispiele ( siehe Wall Street Finest )......

South Korea to investigate foreign brokerages (FT) South Korean’s broking regulator is to

investigate all “sell” recommendations by foreign brokerages

made in the last three months in the wake of a fall of nearly 40 per cent in the benchmark Kospi index this year.

The Korean Securities Dealers Association said on Wednesday it had asked 19 foreign brokerages, including JP Morgan, Goldman Sachs and Credit Suisse, to submit all “sell” reports on Korean shares issued between September and November.

“The public consensus is that foreign research reports are having a negative impact on stock prices

,” the KSDA said. “The public see some problems about their fairness so we want to review the reports.”

The association said it expected to receive the “sell” reports by the end of this week, and would review “whether their reports are fair or whether their sell calls were based on proper reasons.”

However,

the association is not asking for research reports from local brokerages, which rarely issue “sell” recommendations

The KSDA conducted a similar probe into both domestic and foreign brokerages two years ago.

The investigation follows growing complaints by local companies against foreign research reports recommending “sell” on their shares.

In October, the FSS warned JP Morgan about a research report recommending that investors sell Hana Financial Group shares, saying that the recommendation was based on “too conservative” non-performing loans ratio.

JP Morgan later terminated coverage of Hana, saying that it cannot have access to necessary information critical to its research. JP Morgan declined to comment on the case.

In September, Goldman Sachs issued a “sell” report on Kookmin Bank, the country’s biggest commercial lender. Kookmin immediately replaced Goldman Sachs with Merrill Lynch as its adviser for selling treasury shares.

Foreign brokerages in Korea have long been plagued by suspicions that “sell” calls are linked to short-selling activities. Financial regulators have undertaken a separate investigation into short-selling but the results have yet to be announced.

Foreign brokers dispute these claims. “It is nonsense. We have strict standards against such practices. We have a strong firewall between research and investment departments,” said a senior official at a foreign brokerage. “We wonder if the probe is really to protect investors.”

The investigation has sparked strong resistance among foreign brokerages, whose reports are increasingly influential in the local stock market.

“We are completely flabbergasted by this move. Analysts independently issue their opinion for institutional investors, based on their research and insight into the companies. It is totally up to our clients and investors whether or not to take the view,” another foreign brokerage said.

Number Of The Day " European Volvo Net New Truck Orders Now Negative"

I have a strong feeling that we will see similar order intakes from other parts of the world & and different industries in the not so distant future...... I cannot help but somehow the erosion ( or implosion ) of the backlock from the homebuilders comes to my mind....... I assume we will see a comeback of "vendor financing" ...... I have already heard chatter on this topic in several conference calls from GE, Siemens, Boeing, EADS etc...... Wouldn´t be the first time this "strategy" will be backfiring down the road..... But with very few companies having a strong balance sheet going into this long downturn there is at least some hope this won´t get out of control.... But with the culture to prefer short term gains still not dead .......

Ich bin mir ziemlich sicher das wir ähnliche Orderdaten demnächst auch aus anderen Teilen der Welt und leider auch aus anderen Branchen sehen werden....... Das ganze ruft in mir Erinnerungen an die Implosion der angeblich vollen Auftragsbücher bei den Homebuildern wach....... Ich bin mir ziemlich sicher das wir demnächst ein Comeback der Lieferantefinanzierung sehen werden....... Konkrete Aussagen zu diesemThema gab es bereits von Siemens, GE, Boeing und EADS...... Wäre nicht das erste mal das diese Strategie auf lange Sicht mit hohen Risiken verbunden ist. Da aber kaum ein Unternehmen momentna ne starke Bilanz vorzuweisen hat dürften uns Auswüchse wie in der Vergangenheit ( erinnere an die Telekomzulieferer die nachher auf Mrd. an Forderungen sitzen geblieben sind ) erspart bleiben......

Reuters World number two truckmaker Volvo said on Tuesday deliveries had tumbled 21 percent year-on-year in November and that its order book was shrinking rapidly amid a sharp market contraction.

Volvo, whose brands include Renault, Nissan Diesel and Mack as well as its own name, said deliveries fell 42 percent in its biggest market, Europe, and 22 percent in North America.

Volvo has already suffered the effects of this decline, reporting in late October a 100 percent fall in order bookings after clearing its books of uncertain orders and cancellations ( see Number / Shocker Of The Day "Volvo New Truck Orders"..... ) . .

Volvo said a weak order trend from the third quarter had continued

with the number of cancelled orders in October and November eclipsing new orders by some 1,800 trucks in Europe.

"When we saw zero order intake in the third quarter, it looked like this couldn't get any worse -- but it has," said an analyst who asked not to be identified.

"A negative order intake in Europe, that probably had not been anticipated by the market."

> To end on a positive note..... Volvo is up almost 4 percent on this kind of news ( and 30% from the bottom a few weeks ago ) and all competitors ( Scania, MAN, Daimler ) are also in the green.......

> Nach soviel Doom & Gloom ist es zumindest mehr als bemerkenswert das Volvo fast 4% im Plus notiert ( und nebenbei bemerkt satte 30% vom Tief vor einigen Wochen ) und auch alle relevanten Wettbewerber ( Scania, MAN, Daimler ) im grünen Bereich sind......

Chart Of The Day "Dow Vs Gold"

The following chart was buried in the comments from my previous post on gold (Gold’s Post-Bubble Performance In The UK, US And Japan. ). I think this perspective on the valuation of gold deserves "deserves" a sperate post. Further blogging activity will be light until 2009

Der nachfolgende Chart war in den Kommentaen zum letzten Goldposting ( Gold’s Post-Bubble Performance In The UK, US And Japan. ) vergraben. Denke der ist so aussagekräftig das das ich Ihn nochmal gesondert poste. Meine Blogginaktivität wird über die Feiertage bis Anfang 2009 minimal sein.

Chart Of The Day
How significant is this bear market? It all depends on how you measure. When measured in US dollars, the Dow currently trades 39.5% off its October 2007 record high. However, when measured with that other world currency (gold), the picture is actually more dismal. To help illustrate the point, today's chart presents the Dow divided by the price of one ounce of gold. This results in what is referred to as the Dow / gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 10.5 ounces of gold to “buy the Dow.” This is considerably less that the 44.8 ounces it took back in 1999.

When priced in gold, the US stock market has been in a bear market for the entire 21st century.

This Ponzi Scheme Won´t Get A Bailout.......

Unlike others...... I still hope that at least the $ 50 billion number won´t be confirmed but it really looks like this story has the potential to rival the failed auto bailout. Even if the real number is only a fraction this will send shockwaves trough the hedge fund industry and could lead to much more forced selling..... At least the players now burned with billions call themselves "smart money" so we really shoulnd´t feel any mercy ( especially after you have read the "Cassandra Does Tokyo" or "Ft Alphaville" link. Naked Shorts back in 2001 questioned this how "Bernie" Madoff "created" his performance Madoff tops charts;skeptics ask how ).... On the auto topic it wouldn´t surprise me if we will see a TARP solution for the automakers during the next few days..... Wouldn´t be the first u turn from Paulson... :-)

Das wird ein Schneelballsystem sein das im Gegensatz zu anderen an Wall Street nicht rausgehauen wird..... Ich hoffe insgeheim immer noch das die Summe von 50 Mrd $ nicht bestätigt wird aber nichtsdestotrotz hat diese Geschichte das Zeug selbst den gescheiterten Rettungsversuch der US Autoindustrie zu toppen. Selbst wenn die Summe um einiges geringer ausfällt wird dieser Vorfall zu einem weiteren massiven Vertrauensverlust und einem Run auf die Hedge Fonds und damit zu weiteren massivsten Zwangsverkäufen führen...... Dab zu den Geschädigten wohl in erster Linie andere Hedge Fonds gehören hält sich mein Mitgefühl aber sehr in Grenzen ( besonders nachdem man den Insiderbericht von "Cassandra Does Tokyo" & "FT Alphaville" Link gelesen hat die klar belegen das die ausgewiesenen Gewinne seit Jahren nicht stimmig sein können. Siehe auch diese Schlagzeile aus dem Jahr 2001 von Naked Shorts Madoff tops charts;skeptics ask how)........In Sachen Autoindustrie würde es mich nicht wundern wenn plötzlich ( binnen der nächsten Tage ) doch noch eine Lösung im Rahmen der TARP Gelder gefunden wird..... Wäre ja nicht die erste 180 Grad Wendung von Paulson & Co......

Bernie Madoff: The Indictment Original Filing / Original Anklagegeschrift via Henry Blodget / Clusterstock A MUST READ!

He Madoff with how much??? FT Alphaville

“This guy has managed to produce 1-1.2% PER MONTH, year after year after year…” Quote from a ( now money losing ...) client on May 2 2008 ...... via FT Alphaville

Madoff ‘Big Lie’ Hits Fairfield Sentry, Kingate Funds Bloomberg

A $50 Billion Fraud? So Where is the Money? Naked Capitalism

Ex-Nasdaq-Chef wegen Milliarden-Betrugsverdacht festgenommen Der Spiegel

The Madoff Complaint Calculated Risk

Bernie Comes Out of the Closet Cassandra Does Tokyo

> Hard to believe that this "likable" person has probably committed the "mother Of All Ponzi Schemes"....

> Fällt einem schwer zu glauben das dieser "sympatische" ältere Herr die "Mutter aller Schneeballsysteme durchgezogen hat.....

> Too bad that Madoff couldn´t hide his losses under some kind of level 3 accounting......

> Zu dumm das im Gegensatz zu den Banken Madoff seine Verluste nicht hinter der Level 3 Bilanzkosmetik verschleiern konnte......